The present invention relates generally to systems for facilitating transactions, and more specifically to systems for facilitating financial services at the request of a first party for the use of a second party such that the first party may define, modify, and/or terminate the spending capacity accorded the second party.
Many financial institutions are providing plastic stored-value cards (e.g. debit cards, telephone calling cards, loyalty cards, etc.) that can be used in lieu of cash. To enable a stored value card, a user transfers an amount of value to the issuing institution, which stores or credits a corresponding amount of value to the user""s account, allowing the value to be spent by the card user. The value may be transferred to the issuing institution in a variety of ways such as on-line transfers from bank accounts or credit cards. The stored value cards then can be used to pay for items in stores or on-line, and to withdraw cash at automated teller machines (ATMs). The stored value cards appear to function like credit cards, but they often extend little or no credit to the user, so the cards do not substantially enable users to finance their transactions.
Some people or entities may be unable, or may not desire, to acquire traditional credit cards (e.g., teenagers, college students, employees, financially insecure or dependent consumers, or others lacking sufficient credit history, permanent income, or age). These parties, however, often desire the alternative of stored value cards for the convenience and prestige they provide. Those who are responsible for such consumers (e.g., parents, guardians, employers, and the like) often desire stored value cards because they provide a convenient mechanism for disbursing financial support to their employees and/or dependents. For example, stored value cards often enable parents to add value to the cards on-line, remote from a dependant who may be away at college, traveling abroad, or residing with a different guardian. Similarly, companies may desire to use stored value cards to enable employees to make expenditures for travel, supplies, or other business related expenses or may even use such financial vehicles for payment of wages, salary, or bonuses. To many parents, stored value cards also provide a useful teaching aid through which dependants may practice skills such as budgeting, saving, disciplined spending and/or management of credit.
In addition, parents often desire to provide security for their children to prepare for contingencies that may arise such as a need for emergency medical care. At the same time, however, those parents may not wish that their children have general access to funds for non-emergencies. Unfortunately, however, many existing credit cards do not provide a convenient mechanism for permitting a user access to a limited set of goods or services or providers of same while limiting their access to other goods or services.
Stored value cards also provide parents the ability to track and control the spending and/or accumulation of debt by their dependants. For example, some stored value cards provide parents with access to on-line databases that allow review of information about how much and where their dependents spent the value stored on their cards. Dependants also often appreciate the tracking capability because it provides a convenient record not readily available with purely cash transactions.
Some cards are available that enable parents to prevent the cards from being used by the dependent to purchase goods and/or services from specific merchants or classes of merchants (e.g., those who sell pornography, tobacco and alcohol, or other forbidden goods or services). For example, AMERICAN EXPRESS(trademark)"" Cobalt card enables the blocking of purchases from on-line retailers that sell pornography, tobacco and alcohol. Similarly, U.S. Pat. No. 6,173,269 discloses a method and apparatus for executing electronic commercial transactions with minors where such transactions are limited only to those vendors that have been approved by the minor""s parents. Moreover, M2Card highlights xe2x80x9cquestionablexe2x80x9d transactions on account summaries. Other stored value cards, such as xe2x80x9cVISA(trademark) Buxx,xe2x80x9d provide convenience features such as the ability to accept and accumulate gifts in the form of value to be spent at particular merchants. For purchases above the amount of the gift, additional value may be deducted from the stored value card. Other examples of currently available stored value cards include MASTERCARD(trademark)Electronic Card (India, Malaysia), MASTERCARD(trademark) Generation X (Brazil), VISA(trademark) (Brazil), NOVACASH(trademark) (Argentina), and AAA(trademark) Everyday Funds. Unfortunately, stored value cards often require payment of funds prior to or contemporaneously with addition of value to the cards. Thus, once the funds have been credited to the dependant""s account, the cards provide parents with only limited control over the spending capacity and debt accumulation by the dependant.
Other attempts to satisfy the above-described needs without requiring prepayment and storage of value on the cards of the dependants involve the issuance of subsidiary cards that are linked to, and are able to access, the credit lines of the master accounts. For example, U.S. Pat. No. 4,837,422 describes a multi-user card system in which a card combination that is issued to a single cardholder can be re-programmed by the cardholder for use by a sub-user to a desired extent with regard to value and time. Similarly, U.S. Pat. No. 5,864,830 discloses a data processing method of configuring and monitoring a satellite spending card linked to a host credit card such that a predetermined available spending capacity of each satellite card is selectively determined by the holder of the parent card Moreover, U.S. Pat. No. 5,294,472 describes a credit card spending authorization control system in which allowing a parent to control the use of an ancillary credit or debit card, which is issued to a subsidiary. Further, U.S. Pat. No. 5,953,710 shows a subsidiary""s credit or debit card system that includes a subsidiary""s credit card account linked to a parent""s credit or debit card account. The systems disclosed in the foregoing patents have typically experienced limited success because parents may not wish to provide their dependents with access to the parents"" credit line. Moreover, a sufficient mechanism does not exist that would enable a parent to provide credit to a subsidiary, such as a child, while retaining the ability to control the spending capacity and debt accumulation by the subsidiary.
Accordingly, it would be advantageous to have a system and method for providing a flexible limit subsidiary card that does not require the prepayment and/or storage of value prior to use to facilitate transactions. It would also be advantageous to have a financial vehicle that would enable a parent to provide value to be spent by a subsidiary, while providing control over the spending capacity and/or debt accumulation by the subsidiary. It would further be advantageous if such control included the ability to limit total spending or to prevent or limit spending for specific classes of goods and/or services or to limit or prevent spending at specific classes of merchants or service providers or to limit or prevent spending at specifically identified merchants or service providers. It would also be advantageous to have a system and method for providing a flexible limit subsidiary card that would provide additional features such as replacement in the event the card is lost or stolen, wherein such a feature is are not typically available with cash. It would also be advantageous to have a system and method for providing a flexible limit subsidiary card that would provide the user with freedom and independence to use the received funds to facilitate on-line and off-line transactions as well as withdrawals of money from ATMs. It would also be advantageous to have a system and method whereby a parent could provide security for emergency situations such as medical care while limiting access to credit in other situations. Finally, it would be advantageous for such a card to enable carry-over of a credit balance.
The present invention is directed toward a flexible limit subsidiary card account. In particular, the invention is directed toward a system and method that allows a parent to provide funds to a subsidiary and to at least partially control the subsidiary""s spending capacity. The system for administering a subsidiary card account includes a parent and an administrator. The parent, which is responsible for a related credit instrument, e.g., a parent account, is configured to communicate a request for a credit card account to be issued to a subsidiary. The administrator is configured to receive the request from the parent and to facilitate the establishment and issuance of the subsidiary card account. The administrator is also configured to facilitate determination and adjustment of appropriate spending power for the parent account and spending capacity for the subsidiary card account in accordance with a predetermined set of rules. An exemplary set of rules may require an allocation of risk between the administrator and the parent whereby the spending power of the parent account is reduced by an amount that is less than the credit line established for the related subsidiary card account, in accordance with an allocation of risk to the administrator. In addition, an exemplary administrator is further configured to receive and facilitate execution of a request from the parent to define, modify, and/or terminate the spending and/or debt accumulation limits, i.e., capacities, for the subsidiary card account.